Support Measures for DHC

Country

Germany

#

Name and reference of measure

Type of measure

Responsible organ

Existing or planned?

1

Combined Heat and Power Act (KWKModG)

Law (B)

Federal Ministry of Economics and Technology

Existing

Quotations from the measure

Unofficial, legally not binding translation

Article 1

Purpose of the Act

The purpose of the Act is to contribute to the objective of increasing the share of electricity produced in combined heat and power plants in the Federal Republic of Germany to 25% by protecting for a restricted period, modernising and constructing new combined heat and power plants (CHP plants), supporting the launch of fuel cells on the market as well as promoting the construction of new and expanding existing heat networks which supply heat from combined heat and power plants, in the interests of saving energy, environmental protection and achieving the government's climate protection targets.

Article 3

Definition of terms

(...)

(4) CHP electricity is the arithmetical product of useful heat and the power to heat ratio of the CHP plant. All the net electricity generated by plants which do not have facilities for the removal of waste heat is CHP electricity.

(5) Net electricity generation is the electricity generated by a plant, measured at the generator terminals, less internal consumption required for its own operations.

(6) Useful heat is the heat decoupled from a CHP process and used outside the CHP plant for space heating or warm water preparation, cooling production or as process heat.

(...)

(13) Heating networks within the meaning of this Act are facilities for a piped supply of heat which extend horizontally beyond the boundary of the site of the supplying CHP plant and to which an unspecified number of customers may be connected, as they form a public network. At least one customer who is not the owner or operator of the CHP plant supplying the network must be connected to said network.

(14) Within the meaning of this Act, heating network operators are those who supply third parties with heat via a network. The characteristic of operator does not require ownership of the heating network.

(15) The route means all the components which are required to transmit heat from the site of the supplying CHP plants to the consumer's outlet.

(...)

(17) The consumer outlet is the transfer point in accordance with Article 10, paragraph 1 of the Order on General Conditions for the Supply of District Heating of 20 June 1980 (BGBl I p. 742) as most recently amended by Article 20 of the Act of 9 December 2004 (BGBl. I p. 3214).

Article 5a

New and extended heating networks entitled to premiums

(1) Heating network operators are entitled to payment of a premium by the grid operator for new or extended heating networks if

1. The new heating network or extension is commenced no earlier than 1 January 2009 and the new or extended heating network is commissioned no later than 31 December 2020;

2. The supply of consumers connected to the new or extended heating network predominantly with cogenerated heat from CHP plants takes place within the scope of application of this Act in accordance with Article 2 hereof and a proportion of at least 60% of cogenerated heat is substantiated for the planned final status of the network coverage;

3. A licence has been granted in accordance with Article 6a.

(2) New construction means the initial establishment of a heating network including all the components required for transmission of heat from the site of the supplying CHP plant to the consumer outlet in a territory in which heat was not previously supplied by heating networks.

(3) Extension means that expansion of an existing heating network for the connection of consumers not hitherto supplied by heating networks by the erection of new heating network with all the components necessary for the transmission of heat from the existing heating network to the consumer outlet. Network enhancement measures which entail an increase in the transportable volumetric heat current of at least 50% over the part of the route in question, and the combination of existing networks, are equivalent.

(4) Should the new or expanded heating network extend through the territory of more than one network operators, the network operator to whose network the CHP plant with the greatest installed electrical capacity is connected and which supplies the heating network is obliged to make payment. Article 4, paragraph 3, sentence 2 applies analogously. In the case of more than one CHP plants of the same size, the first to enter operation will be applicable.

Article 6a

Licensing of new and extended heating networks

(1) The heating network operator must be granted a licence if the new or extended heating network fulfils the requirements of Article 5a, paragraphs 1 to 2. The application must include:

1. Details of the applicant and network operator;

2. A detailed description of the project, including details of the length of the new or extended heating network (route length), the planned minimum heat flow, a schedule of the investment costs and the date of commissioning;

3. Certification by an auditor or sworn accountant that the requirements of Article 5a, paragraph 1, Nos. 1 and 2 and of the details in accordance with Article 7a, paragraph 1, sentences 2 and 3 have been fulfilled and the amounts deducted in accordance with Article 7a, paragraph 3.

(2) The licence application may be submitted up to 28 February of the calendar year following the year of commissioning of the new or extended heating network. The time of initial commencement of a continuous supply of heat will be deemed commissioning.

(3) Article 6, paragraphs 4 and 5 will apply analogously.

Article 7a

Payment of premiums for new and extended heating networks

(1) The responsible authority sets the premium for new and extended heating networks under Article 5a. The premium is one Euro per metre of route for each millimetre of the nominal diameter of newly-laid heating pipe. The premium in sentence 1 may not exceed 20% of the qualifying investment cost of the new or extended network, or five million Euros per project.

(2) Qualifying investment costs are all the costs actually incurred for necessary services by third parties within the scope of new or extended heating networks. They do not include the internal costs of design, planning, calculation, property, insurance and finance. Reductions in investment costs and payments by third parties must be deducted.

(3) The proportion of the premium attributable to the connection between the distribution network and the consumer outlet must be deducted from the amount invoiced to the consumer for connection costs.

(4) The total paid in premiums for heating networks must not exceed 150 million Euros per calendar year. Annual premium payments will be made in the order of licensing, in accordance with Article 6a, sub-paragraph 1, up to the amount specified in sentence 1. Amounts above this level will be paid in subsequent years, allowing for sentence 2.

The Purpose of the measure

Why was it introduced?

Taken directly from the Act (unofficial translation by AGFW):

“The purpose of the Combined Heat and Power Act is to contribute to the objective of increasing the share of electricity produced in combined heat and power plants in the Federal Republic of Germany to 25 % by protecting for a restricted period, modernising and constructing new combined heat and power plants (CHP plants), supporting the launch of fuel cells on the market as well as promoting the construction of new and expanding existing heat networks which supply heat from combined heat and power plants, in the interests of saving energy, environmental protection and achieving the government's climate protection targets.”

As a basic instrument the Combined Heat and Power Act obliges grid operators to connect CHP plants to their grid and give priority to buying electricity from cogeneration. A similar priority exists for electricity from renewable energy sources, so the Combined Heat and Power Act clarifies that both these obligations are equal before the law.

For electricity from cogeneration a premium is paid by the grid operator on top of the market price for electricity or the price the CHP plant operator achieved by marketing the electricity from cogeneration himself. By means of a management system the costs for this premium are shifted towards and divided upon all electricity customers. The premium is granted for a limited time only and serves to offset higher investment costs for CHP plants in comparison to condensing power plants.

In order to produce electricity from cogeneration sufficient heat sinks are needed. In order to reach the target of 25 % of electricity from cogeneration the government realised, that incentives had to be granted for opening up new heat sinks. Therefore the aforementioned premium now applies to new and extended heating networks as well, if they are supplied mainly by heat from cogeneration. The premium is one Euro per metre of route for each millimetre of the nominal diameter of the newly-build heating pipe. The premium may not exceed 20 % of the investment cost of the new or extended network, or five million Euros per project.

For which target groups? National or regional?

The target groups are national CHP plant operators and heating network operators.

Which activities does it aim to stimulate?

In general the Act tries to stimulate the production of electricity from cogeneration. And in order to stimulate the production it also aims to stimulate the creation of additional heat sinks by incentivizing the building of new and the extension of existing heating grids.

What results does it expect?

The result is 25 % of electricity from cogeneration by 2020. That translates to almost doubling the current share of electricity from cogeneration of 13 %.

Is it related to Germany’s implementation of any EC Directive?

The Act also serves as the implementation of Directive 2004/8/EC on the promotion of cogeneration based on a useful heat demand in the internal energy market (Cogeneration Directive).

Eligibility Criteria

In order to qualify for the premium paid for new and extending District Heating networks the networks have to fulfil certain eligibility criteria as laid out in the Act.

The new or extended networks need to be licensed by the responsible administrative body. An application for a licence can be filled out after the commissioning of the new or extended network. The administrative body is obliged to licence the network if the following criteria are met:

- The new heating network or extension is commenced no earlier than 1 January 2009 and the new or extended heating network is commissioned no later than 31 December 2020;

- The supply of consumers connected to the new or extended heating network predominantly with cogenerated heat from CHP plants takes place within the scope of application of this Act in accordance with § 2 hereof and a proportion of at least 60% of cogenerated heat is substantiated for the planned final status of the network coverage.

Impact of Measure

Planning:

The Act has a positive effect on planning because grid operators are obliged to connect CHP plants to the grid and buy electricity from cogeneration with priority over conventional electricity. In this context the legal equality between electricity from cogeneration and electricity from renewable energy sources also has a positive effect because electricity from renewable energy sources and electricity from cogeneration block out conventional electricity and can not be used to block each other out. This gives plant operators more certainty in regards their investments and future developments.

Generation:

The Act also has a positive effect on generation because of the premium being paid for electricity from cogeneration. This premium has been extended in the newly amended Act and was introduced to offset higher investment costs for CHP plants. Because of the ecological and climate change benefits CHP has over the separated generation of heat and electricity, CHP and District Heating are natural allies. The connection between the development of CHP and the development of District Heating is finally being acknowledged by the legislative body, when Heating networks can now apply for a payment of the premium used for electricity from cogeneration exclusively before. In this sense District Heating serves as a heat sink for CHP and on top of that provides valuable infrastructure for renewable energy sources and/or heat that would otherwise be wasted.

Distribution:

The Act has a positive effect on distribution since it helps to offset high investment costs involved with the laying of pipelines.

Demand:

Since the Act provides incentives to connect more customers to District Heating networks it also helps the demand side. Connecting more customers to District Heating will secure or even raise heat sales.

Organization:

The Act has no direct effect on the organization side.

Effectiveness of the measure

Could the measure be considered effective?

The Act can be considered effective.

Due to which reasons? (quantifications if possible)

The Act has only been in force for about a year, making quantifications complicated at this time. AGFW is currently conducting a survey aimed at District Heating utilities and asking them about their plans for the development of District Heating in their company. Results are expected sometime next year. Although quantifications are complicated there are a lot of District Heating utilities currently planning and already beginning (due to the fact that work has to be finished before the network operator can apply for premium payment) with the further development of District Heating in their supply areas. The Act and its incentives have sparked interest in District Heating development strategies.

How well does the measure suit the market conditions of your country?

The measure suits the market conditions in the sense that it aims to offset the relatively high investment costs in both production and distribution of District Heating from CHP.

Are there any recommended changes to this measure?

There are certain clarifications that may be necessary in the context of administrative procedures but the District Heating branch is satisfied with the general direction of the Act.

Is there any review process for this measure and if so what is it?

An interim audit is foreseen for 2011, involving the Federal Ministry for the Economy and Technology, in conjunction with the Federal Ministry for the Environment, Nature Protection and Reactor Safety and the involvement of German industrial and energy industry associations. The interim audit will deal with the development of electricity from cogeneration in Germany, particularly in respect of the achievement of the energy and climate policy objectives of the federal government, the conditions for cost-effective operation of CHP plants and the annual premium payments, taking past and emergent developments into consideration.

III. SUPPORT MEASURES FOR DHC

Country

Germany

#

Name and reference of measure

Type of measure

Responsible organ

Existing or planned?

2

Act on the Promotion of Renewable Energies in the Heat Sector (EEWärmeG)

Law (B,C)

Federal Ministry for the Environment, Nature Protection and Reactor Safety

Existing

Quotations from the measure

Unofficial, legally not binding translation

Article 3

Obligation to use renewable energies

(1) Owners of newly constructed buildings pursuant to Article 4 (obligated parties) must cover a share of the thermal energy demand with renewable energies as stipulated in the provisions of Articles 5 and 6.

(2) The Länder can lay down an obligation to use renewable energies in existing buildings. Buildings pursuant to Article 19 (1) and (2) shall also be deemed to be existing buildings.

Article 7

Alternative measures

The obligation contained in Article 3 (1) shall be deemed to be met if the obligated parties

(...)

3. cover the thermal energy demand directly from a local or district heating grid as defined in No. VII of the Annex to this Act.

Article 8

Combining measures

(1) To meet the obligation contained in Article 3 (1), renewable energies and alternative measures pursuant to Article 7 can be used in any form of combination with each other.

(2) The percentage shares of actual use of the different renewable energies and alternative measures within the meaning of (1) must amount to 100 in relation to the respective use as prescribed by this Act for each energy type and measure.

Article 16

Compulsory connection and use

The municipalities and local authority associations can make use of a provision under Land law authorising them to establish compulsory connection and use regarding a local or district heating supply grid, also for the purpose of climate protection and resource conservation.

Annex (to Articles 5, 7, 10 and 15)

Requirements for the use of renewable energies, waste heat, combined heat and power and for energy saving measures and heat grids

(...)

II. Biomass

1. Gaseous biomass

a) The use of gaseous biomass shall only be deemed to fulfil the obligation contained in Article 3 (1) if the biomass is used in a CHP installation.

b) The use of gaseous biomass which is processed to natural gas quality and fed into a grid shall only be deemed to meet the obligation contained in Article 3 (1) if

aa) the processing and feed-in of the biogas reduces, according to the relevant best available technology,

- methane emissions into the atmosphere and

- electricity consumption

and

bb) the process heat needed for the generation and processing of the gaseous biomass is extracted from renewable energies or waste heat. For sentence 1 aa) first indent, compliance with the best available technology shall be presumed if the quality requirements for biogas pursuant to Article 41f (1) of the Gas Grid Access Ordinance of 25 July 2005, as amended by Article 1 of the Act of April 2008 in the version applicable at the time, are complied with.

c) For letter (a), proof within the meaning of Article 10 (3) shall be certification from an expert, the installation manufacturer or the specialist firm which assembled the installation, and for letter (b), certification from the fuel supplier.

(...)

V. Combined heat and power

1. The use of heat from CHP installations shall only be deemed to meet the obligation contained in Article 3 (1) and to be an alternative measure pursuant to Article 7 No. 1 (b) if the installation is a high-efficiency cogeneration plant within the meaning of Directive 2004/8/EC of the European Parliament and of the Council on the promotion of cogeneration based on a useful heat demand in the internal energy market and amending Directive 92/94/EEC. CHP installations with an electrical capacity below one Megawatt are deemed to be high-efficiency cogeneration plants if they achieve primary energy savings within the meaning of Annex III of Directive 2004/8/EC.

2. For the use of heat from CHP installations, proof within the meaning of Article 10 (3) shall be

a) for installations operated by the obligated party, certification from an expert, the installation manufacturer or the specialist firm which assembled the installation,

b) for installations not operated by the obligated party, certification from the installation operator.

(...)

VII. Heat grids

1. The use of heat from a local or district heating supply shall only be deemed to be an alternative measure pursuant to Article 7 No. 3 if

a) a substantial share of the heat comes from renewable energies,

b) at least 50 percent of the heat comes from installations for the use of waste heat,

c) at least 50 percent of the heat comes from CHP installations or

d) at least 50 percent of the heat comes from a combination of the measures named in (a) to (c). Nos. I to V shall apply accordingly.

2. Proof within the meaning of Article 10 (3) shall be certification from the heat grid operator.

The Purpose of the measure

Why was it introduced?

Taken directly from the Act (unofficial translation by the Federal Ministry for the Environment, Nature Protection and Reactor Safety):

“The purpose of the Act is to facilitate sustainable development of the energy supply and promote the further development of technologies for the generation of heat from renewable energies, especially with a view to climate protection, efficient use of fossil resources and the reduction of import dependence. In order to fulfil this purpose while maintaining economic feasibility, the aim of this Act is to contribute to increasing the renewable energies' share in final energy consumption for heat (space heat, cooling and process heat and hot water) to 14 percent by 2020.”

The basic instrument is an obligation to use energy from renewable sources to a certain extent in newly built buildings (or existing buildings if the federal states so desire, see below). District Heating is not considered a renewable energy source per se but if the heat is produced by a substantial share of renewable energy sources, by a share of at least 50 % of CHP or a combination of both District Heating is considered an alternative measure and the obligations to use renewable energy sources deemed to be met.

For which target groups? National or regional?

The Act targets owners of newly built buildings on a national level. The federal states are empowered to extent the scope of the Act to cover existing buildings as well.

Which activities does it aim to stimulate?

Saving fossil fuels and substantially reduce emissions of harmful greenhouse gases by significantly increasing the share of renewable energy sources or alternative measures used for meeting the heat demand of buildings.

What results does it expect?

Increasing the share of renewable energy sources in the final energy consumption for heat to 14 %.

Is it related to Germany’s implementation of any EC Directive?

A lot of the criteria set out in Directive 2009/28/EC on the promotion of the use of energy from renewable sources (RES Directive) are pre-emptively introduced in this Act.

Eligibility Criteria

In order to qualify as an alternative measure the heat grid must fulfil certain eligibility criteria.

The heat supplied by the heat grid must come from either a substantial share of renewable energies, 50 percent of waste heat, CHP or a combination of the above. At this moment it is not clear what amount on renewable energy sources would constitute for a substantial share but since the legislative body has not used the term 50 percent as in the other criteria set out in this part of the Annex, it can be concluded that the share must be below 50 percent, otherwise the term predominantly would have been used in this context.

If the heat comes from CHP plants, then these plants will have to be high-efficient in accordance with the CHP Directive.

Impact of Measure

Planning:

The Act has a positive impact on planning since it creates a balance between the use of renewable energy sources and the use of CHP based on fossil fuels. Both help reduce primary energy demand and greenhouse gas emissions and are therefore considered equal. While District Heating from CHP based on fossil fuels is not considered to be a renewable energy source it does help companies with investment decisions because they can be sure that the benefit of CHP is acknowledged in regards to the increased use of renewable energy sources as well.

Furthermore the clarification that mandatory heat planning of municipalities is viable for global climate change and energy security considerations provides municipalities and District Heating utilities with a voluntary tool to tackle climate change, which can be an appropriate way of securing feasibility for District Heating in certain areas.

Generation:

The Act has no direct influence on the generation side. There are certain criteria for heat grids to be considered. Heat grids based solely on heat plants with no significant amount of either renewable energy sources or CHP being used will not be able to fulfil these criteria. But since around 84 % of the heat supplied to District Heating networks in Germany comes from CHP this will in all probability not be a deciding factor. First and foremost it was necessary to include District Heating as an alternative measure for the mandatory use of renewable energy sources to further develop in both directions, which is vital to tackle the challenges in climate change, energy security and energy efficiency.

Distribution:

The Act has a positive impact on distribution since it acknowledges heat grids to be important infrastructure and therefore raises the value of these installations.

Demand:

There is no impact on the demand side, there is a possibility to fulfil the criteria for an obligatory use of renewable energy sources through insulation measures, driving demand even further down but these criteria are only one of the alternative measures and District Heating is therefore able to compete as an alternative measure on equal ground.

Organization:

There is no impact on organization.

Effectiveness of the measure

Could the measure be considered effective?

The measure can be considered effective.

Due to which reasons? (quantifications if possible)

There are no quantifications possible at this point but the Act serves as a good argument for District Heating as a future-proof heat supply from a legal perspective and has a positive effect on the image and perception of District Heating as an environmentally friendly and flexible heat supply.

How well does the measure suit the market conditions of your country?

The measure in general suits the market conditions of Germany, with the exception of the issue mentioned below regarding the use of District Cooling.

Are there any recommended changes to this measure?

The DH industry is in general satisfied with what has been achieved, DH based on renewable energy sources and/or CHP as an alternative measure demonstrate that DH and renewable energy sources complement each other. The DH industry would welcome a clarification that District Heating must not necessarily cover the total thermal energy demand, consisting of heat and cold demand. This would leave room for district cooling solutions with central absorption chillers and on-site district cooling solutions based on a combination of absorption and compression chillers for peak demands.

Is there any review process for this measure and if so what is it?

A review could incorporate potential changes that might be involved with the transformation the Directive 2009/28/EC into national law. An expert report on the subject deemed the system as an appropriate measure in terms of the transformation of the RES Directive. From this legal perspective, the system of acknowledging District Heating based on fossil CHP as an alternative measure for the obligatory use of renewable energy sources does not collide with the regulations required in the RES Directive. Certain other regulations of the RES Directive may need to be transformed into national law though and therefore may prompt a review.

III. SUPPORT MEASURES FOR DHC

Country

Germany

#

Name and reference of measure

Type of measure

Responsible organ

Existing or planned?

3

Ordinance on General Conditions for the Supply of District Heating (AVBFernwärmeV)

Ordinance (A)

Federal Ministry of Economics and Technology

Existing

Quotations from the measure

Unofficial, legally not binding translation

Article 1

Purpose of the ordinance

(1) Articles 2 through 34 apply, if a District Heating utility uses contractual terms for the connection to and the supply of District Heating, which have been drafted in advance for a multitude of contracts. Articles 2 through 34 are part of the utility supply contract, unless otherwise stated in paragraph 3 or Article 35.

(2) The ordinance does not apply to the connection and supply of industrial customers.

(...)

Article 3

Fulfilment of demand

(...)The customer is obliged to fulfil his heat demand out of the grid of the District Heating utility to the agreed extent. (...)

Article 4

Type of supply

(...)

(2) Changes of the supply terms will take effect after they have been publicly announced.

(3) For the contractual relationship the heat carrier that has been agreed upon is decisive. The District Heating utility can change the agreed heat carrier if it is necessary for economical or technical reasons. (...)

(...)

Article 17

Technical connecting conditions

(1) The District Heating utility can define further technical conditions for the house service connection, other parts of the system and the operation of the installation, if it is necessary for a secure and undisturbed supply, especially concerning the distribution grid and the production installations. These conditions may not be contradictory to generally recognised codes of practice. (...)

(2) The District Heating utility must notify the competent authority of further technical conditions. The competent authority may object to further technical conditions if they are not reconcilable with the spirit and purpose of the ordinance.

Article 24

Billing, price amendment clauses

(...)

(3) Price amendment clauses must, in a suitable way, take into account both the development of costs in District Heating production and supply of the District Heating utility and the respective developments of the heating market in general. They have to include the relevant calculation methods completely and in a generally understandable way. When applying price amendment clauses the percentage of the factor used for the development of fuel prices in comparison to the price alteration in general must be disclosed separately.

Article 32

Contract duration, termination

(1) The duration of supply contracts, which are concluded according to this ordinance, must not exceed 10 years. If the contract is not terminated by either party nine months before the contract expires, the contract is automatically renewed for a duration of five years.

(...)

(5) If the customer is also the property owner of the supplied space, he is obliged report the sale of the property to the District Heating utility as soon as possible. If the sale occurs during the expressly agreed contract duration, the customer is obliged to impose the entry into the contract upon the acquirer. (...)

(...)

(7) The contract can only be terminated in written form.

The Purpose of the measure

Why was it introduced?

The “normal” framework for the relation between customers and companies was deemed inappropriate to handle the specific technical and economical features of District Heating supply on the one hand and customers’ needs on the other.

Therefore the ordinance sets a general framework for standard business conditions for the supply of District Heating to consumers. The supply of industrial customers with District Heating does not fall under the scope of the ordinance.

Customers which are connected to the District Heating grid have the right to be supplied according to the general conditions laid out in the ordinance if standard business conditions are being used. The District Heating utilities on the other hand can only deviate from these conditions with the explicit consent of the customer.

For which target groups? National or regional?

The ordinance targets both customers and companies on a national level.

Which activities does it aim to stimulate?

There is no certain activity that is supposed to be achieved. The ordinance aims to set a contractual framework to the benefit of both the customer and the development of District Heating.

What results does it expect?

Legal certainty and customer protection.

Is it related to Germany’s implementation of any EC Directive?

Eligibility Criteria

The ordinance applies, if a District Heating utility uses contractual terms for the connection to and the supply of District Heating, which have been drafted in advance for a multitude of contracts. If this is the case the ordinance becomes part of the supply contract. It does however not apply to the connection and supply of industrial customers since the purpose of the measure is customer protection. Industrial customers are not deemed to be in the same need of protection as other customers.

Impact of Measure

Planning:

Due to the prolonged contract duration the planning of District Heating utilities is impacted in a positive way. Legal certainty and the balance between customer protection and interests of the utilities also has a positive effect on the planning stages.

Generation:

Distribution:

The same applies for the generation.

Demand:

Demand is indirectly influenced by the ordinance as well. A stable contractual framework provides benefits for both the consumer and the District Heating utilities.

Organization:

Effectiveness of the measure

Could the measure be considered effective?

The ordinance can be considered effective.

Due to which reasons? (quantifications if possible)

The ordinance was introduced in 1980 and has been “surviving” all these years, without any major complaints from either the consumers or the District Heating utilities. It is widely accepted and the benefits for both parties have a positive effect on its acceptance.

How well does the measure suit the market conditions of your country?

The measure is suited to the market conditions in Germany. The ordinance provides for a high level of customer protection while also enabling District Heating utilities to operate in a liberated heat market. Especially transparent automatic price amendment clauses, which work in both ways, are for the benefit of the customer.

Are there any recommended changes to this measure?

Is there any review process for this measure and if so what is it?

III. SUPPORT MEASURES FOR DHC

Country

Germany

#

Name and reference of measure

Type of measure

Responsible organ

Existing or planned?

4

Act on Granting Priority to Renewable Energy Sources (EEG)

Law (C)

Federal Ministry for the Environment, Nature Protection and Reactor Safety

Existing

Quotations from the measure

Unofficial, legally not binding translation

Article 3

Definitions

Within the meaning of this Act

10. "electricity from combined heat and power generation" within the meaning of section 3(4) of the

Combined Heat and Power Act of 19 March 2002 (Federal Law Gazette I p. 1092), as last amended by

Article 170 of the Ordinance of 31 October 2006 (Federal Law Gazette I p. 2407), shall mean electricity generated in installations within the meaning of section 5 of the Combined Heat and Power Act,

Article 27

Biomass

(1) The tariff paid for electricity from biomass within the meaning of section 64(1) first sentence no. 2 of the Biomass Ordinance shall amount to

1. 11.67 cents per kilowatt-hour for the first 150 kilowatts of output,

2. 9.18 cents per kilowatt-hour for output between 150 and 500 kilowatts,

3. 8.25 cents per kilowatt-hour for output between 500 kilowatts and 5 megawatts, and

4. 7.79 cents per kilowatt-hour for output between 5 and 20 megawatts.

Those quantities of vegetable oil methyl ester required as start-up, priming and supporting fuel shall be deemed to be biomass.

(3) The entitlement to payment of a tariff shall exist for electricity

1. from installations with a capacity of over 5 megawatts insofar as the electricity is from combined heat and power generation pursuant to Annex 3 to this Act,

3. from installations which use gas withdrawn from a gas network within the meaning of subsection (2) above only insofar as the electricity is from combined heat and power generation pursuant to Annex 3 to this Act.

(4) The tariffs shall increase for electricity in accordance with subsection (1) above which is generated

3. in combined heat and power generation pursuant to Annex 3 to this Act by 3.0 cents per kilowatt-hour

(CHP bonus).

Article 28

Geothermal energy

(1) The tariff paid for electricity from geothermal energy shall amount to

1. 16.0 cents per kilowatt-hour for the first 10 megawatts of output, and

2. 10.5 cents per kilowatt-hour for output over 10 megawatts.

(2) The tariffs shall increase by 3.0 cents per kilowatt-hour for electricity in accordance with subsection (1) no. 1 above generated in combination with the use of heat pursuant to Annex 4 (heat use bonus).

Annex 3

CHP bonus

I. Eligibility criteria

Entitlement to the CHP bonus in accordance with section 27(4) no. 3 shall apply to a maximum capacity within the meaning of section 18 of 20 megawatts, where

1. the electricity is electricity within the meaning of section 3(4) of the Combined Heat and Power Act, and

2. the heat is used within the meaning of the Positive List no. III, or

3. the heat use demonstrably replaces fossil energies with an energy equivalent comparable to the quantity of fossil heat used and proof can be furnished of the additional costs arising from the supply of the heat, which amount to at least EUR 100 per kilowatt of heat capacity.

II. Required proof

1. Proof that the criteria in accordance with no. I.1 are met shall be furnished to the grid system operator in accordance with the generally accepted rules of technology; the generally accepted rules of technology shall be assumed to have been complied with where the requirements of Worksheet FW 308 - Zertifizierung von KWK-Anlagen - Ermittlung des KWK-Stromes (Certification of CHP Installations - Determining the CHP Electricity) in the applicable version as published by the Arbeitsgemeinschaft für Wärme und Heizkraftwirtschaft (AGFW) are met. Such proof must be furnished each year by presenting a certificate issued by an environmental verifier. Instead of the proof in accordance with the first sentence above, CHP installations produced in series with a maximum capacity of 2 megawatts may present appropriate documentation from the manufacturer which indicates the thermal and electrical capacity and the electricity coefficient.

2. Proof that the criteria in accordance with nos. I.2 and I.3 are met shall be furnished by presenting a technical expert opinion by an environmental verifier when the CHP bonus is claimed.

III. Positive List

The following shall be categorised as the use of heat within the meaning of no. I.2:

1. the heating, hot water supply or cooling of buildings within the meaning of section 1(1) no. 1 of the Energy Saving Ordinance up to a heating capacity of 200 kilowatt-hours per square metre of useable floor area per annum,

2. the feeding of heat into a network of at least 400 metres in length and with losses due to heat distribution and transmission of below 25 per cent of the useful heat demand of heat customers,

3. the use of process heat for industrial processes within the meaning of nos. 2 to 6, 7.2 to 7.34, 10.1 to 10.10 and 10.20 to 10.23 of the Annex to the Fourth Ordinance Implementing the Federal Immission Control Act of 14 March 1997 (Federal Law Gazette I p. 504), as last amended by Article 3 of the Act of 23 October 2007 (Federal Law Gazette I p. 2470), and the manufacturing of wood pellets for use as fuel,

IV. Negative List

The following shall not be categorised as the use of heat within the meaning of nos. I.2 and I.3:

1. the heating of buildings which, in accordance with section 1(2) of the Energy Saving Ordinance, are not the subject matter of the Ordinance, with the exception of buildings covered by nos. III.4 to III.6,

2. the use of waste heat from biomass installations for electricity generation, in particular in organic Rankine and Kalina-cycle processes, and

3. the use of heat from biomass installations which utilise fossil fuels, for example to cover their own heat

needs.

Annex 4

Heat use bonus

I. Eligibility criteria

Entitlement to the heat use bonus in accordance with section 28(2) shall apply where

1. at least one fifth of the available heat capacity is decoupled, and

2. the heat use demonstrably replaces fossil energies with an energy equivalent comparable to the quantity of fossil heat used.

II. Required proof

Proof that the criteria in accordance with no. I are met shall be furnished by presenting a technical expert opinion by an environmental verifier as soon as the bonus is claimed for the first time.

III. Positive List

The following shall be categorised as the use of heat within the meaning of no. I:

1. the heating, hot water supply or cooling of buildings within the meaning of section 1(1) no. 1 of the Energy Saving Ordinance up to a heating capacity of 200 kilowatt-hours per square metre of useable floor area per annum,

2. the feeding of heat into a network of at least 400 metres in length and with losses due to heat distribution and transmission of below 25 per cent of the useful heat demand of heat customers,

3. the use of process heat for industrial processes within the meaning of nos. 2 to 6, 7.2 to 7.34, 10.1 to 10.10 and 10.20 to 10.23 of the Annex to the Fourth Ordinance Implementing the Federal Immission Control Act, as last amended by Article 3 of the Act of 23 October 2007 (Federal Law Gazette I p. 2470), and the manufacturing of wood pellets for use as fuel.

IV. Negative List

The following shall not be categorised as the use of heat within the meaning of no. I:

1. the heating of buildings which, in accordance with section 1(2) of the Energy Saving Ordinance, are not the subject matter of the Ordinance,

2. the use of heat for the supply, conversion and residue treatment of biogenic raw materials utilised

energetically, with the exception of the production of wood pellets for use as fuel,

3. the loading of heat stores without proof of utilisation pursuant to the Positive List.

The Purpose of the measure

Why was it introduced?

Taken directly from the Act (unofficial translation of the Federal Ministry for the Environment, Nature Protection and Reactor Safety):

“The purpose of this Act is to facilitate a sustainable development of energy supply, particularly for the sake of protecting our climate and the environment, to reduce the costs of energy supply to the national economy, also by incorporating external long-term effects, to conserve fossil fuels and to promote the further development of technologies for the generation of electricity from renewable energy sources. To achieve this purpose, this Act aims to increase the share of renewable energy sources in electricity supply to at least 30 percent by the year 2020 and to continuously increase that share thereafter.”

As a basic instrument the Act obliges grid operators to connect power plants producing electricity from renewable energy sources to their grid and give priority to buying their electricity.

For electricity from energy sources a feed-in tariff system is introduced by the Act. Grid operators are obliged to buy the electricity from renewable energy sources at this fixed tariff. Alternatively the power plant operator can sell his electricity directly on a month-to-month basis. By means of a management system the costs for these feed-in tariffs are shifted towards and divided upon all electricity customers. The tariff depends on the type of renewable energy source and is by far the highest for electricity from photovoltaic, although it only provides a very low amount of electricity overall.

For which target groups? National or regional?

The Act targets power plant and grid operators on the national level.

Which activities does it aim to stimulate?

The use of more renewable energy sources in electricity production.

What results does it expect?

A share of 30 % of electricity from renewable energy sources by 2020.

Is it related to Germany’s implementation of any EC Directive?

It is an implementation of Directive 2001/77/EC on the promotion of electricity produced from renewable energy sources in the internal electricity market.

Eligibility Criteria

There is a bonus payment for the use of CHP when using biomass for electricity production. As a first and foremost eligibility criterion the electricity must be considered electricity from cogeneration in accordance with the KWKMODG. That means useful heat has to be decoupled from the process, which includes space heating, warm water preparation, cooling production or process heat. On top of that the Act introduces additional eligibility criteria to define what the heat is used for in order for the electricity to be applicable for the CHP bonus. The type of building, heat network and industrial process is described in more detail. Background for this regulation is that there were issues in the past with agricultural holdings maximizing the CHP bonus of their biogas installations by using it to heating barns etc. that did not need heating or use networks to provide heat that had very high losses in order to raise the amount of heat decoupled from the process. It was therefore necessary to tighten the system for the CHP bonus.

The bonus payment for heat decoupled from geothermal electricity production follows a similar pattern, although it is not necessary to use CHP in this context due to technical reasons. There are installations that use “true” CHP in geothermal processes but this is not practiced on a broader scale yet. To be applicable the heat just needs to be decoupled in the process without the need to produce electricity from cogeneration. The heat use has to fulfil the same eligibility criteria as the heat used for the CHP bonus (refer to above).

Impact of Measure

Planning:

The measure has a positive effect on the planning stages since the feed-in tariff is guaranteed for a certain period.

Generation:

Due to the CHP bonus now being tied to a stricter use of heat decoupled from the process the measure has a positive effect on the generation.

Distribution:

The same reason also applies to the distributional side, since it is now necessary to use heat in a meaningful way distributional infrastructure will be developed and expanded.

Demand:

Organization:

Effectiveness of the measure

Could the measure be considered effective?

The EEG has helped raising the share of renewable energy in the electricity production, in this sense the measure could be considered effective. On the other hand the measure is also very cost-intensive and efficiency is not a main driver in the allocation system.

Due to which reasons? (quantifications if possible)

From the introduction of the EEG in 2000 through 2008 the share of electricity from renewable energy sources more than doubled from 6.3% to 15.1%. Although it is being questioned whether the same development could have been achieved with less financial burden for the electricity consumers. Especially high feed-in tariffs for electricity from photovoltaic has been the topic of discussions, although such electricity receives the highest feed-in tariffs the contribution towards the electricity production have been very low with less than 1% of the electricity coming from photovoltaic.

How well does the measure suit the market conditions of your country?

The EEG does not incorporate a market element. It is based solely on fixed tariffs, unlike the KWKModG, which grants a premium to the market price of electricity.

Are there any recommended changes to this measure?

There are two major flaws which put District Heating based on CHP at a disadvantage. The first is the so called “exclusivity-criterion”. Only installations that use renewable energy sources exclusively benefit from feed-in tariffs. That is a barrier to the most efficient use of biomass in bigger CHP plants.

Another criterion that proves to be a barrier for the use of biomass in bigger CHP plants and therefore in District Heating as well is the limitation of the feed-in tariff system for the use of biomass to 20 MW.

Therefore both the exclusivity criterion as well as the limitation for the system to 20 MW should be revised to encourage the efficient use of biomass in large scale CHP plants.

Is there any review process for this measure and if so what is it?

A review on the feed-in tariff regarding the tariff for electricity from photovoltaic is currently being conducted. The costs for the feed-in tariff have been climbing steadily and the very high tariffs for photovoltaic play a very big role in this. Both industry and consumer groups have been complaining about rising costs for electricity. As a consequence the tariff for electricity from photovoltaic will be decreased, but not significantly.

III. SUPPORT MEASURES FOR DHC

Country

Germany

#

Name and reference of measure

Type of measure

Responsible organ

Existing or planned?

5

Energy Saving Ordinance (EnEV)

Law (A)

Federal Ministry for Economics and Technology; Federal Ministry of Transport, Building and Urban Development

Existing

Quotations from the measure

Unofficial, legally not binding translation

Article 1

Scope

(1) This ordinance applies to

1. buildings, if they are heated or cooled using energy, and

2. heating, cooling, ventilation, lighting and warm water installations and appliances of buildings according to No. 1.

(...)

Article 3

Residential building standards

(1) New residential buildings must not exceed the yearly primary energy demand for heating, warm water production, ventilation and cooling of a reference building with the same geometry, usable building area and orientation and with the technical reference design according to Annex 1 Table 1.

(...)

(3) The yearly primary energy demand of the new residential building as well as the reference building is to be calculated according to a method contemplated in Annex 1 No. 2. The new residential building and the reference building have to be calculated according to the same method.

(...)

Annex 1 (to Articles 3 and 9)

Residential building standards

1 Maximum value of the yearly primary energy demand and the specific transmission heat loss (to Article 3 Paragraph 1 and 2

1.1 Maximum value of the yearly primary energy demand

The maximum value of the yearly primary energy demand of new residential buildings is the yearly primary energy demand calculated according to a method contemplated in No. 2.1 and relating to the usable building area of a reference building with the same geometry, usable building area and orientation and with the technical reference design according to Table 1.

(...)

Table 1

Technical reference design of the reference building

(...)

5 Heating System

- Calorific value boiler (enhanced), domestic fuel oil, (...)

6 Warm water installation

- Central warm water production

- Combined warm water production in heating system according to line 5

- Solar system (...)

- Storage system (...)

(...)

7 Cooling

- No cooling

(...)

2 Calculation method for residential buildings (to Article 3 Paragraph 3, Article 9 Paragraph 2 and 5)

2.1 Calculation of the yearly primary energy demand

2.1.1 The yearly primary energy demand of residential buildings Q_p is calculated according to DIN V 18599 : 2007-02. Primary energy factors are the values for the non-renewable share according to DIN V 18599-1 : 2007-02. (...)

For various reasons the technical standards referenced by the EnEV can not be translated.

The Purpose of the measure

Why was it introduced?

Buildings play a big role in combating climate change. In order to lift the potential the ordinance aims to reduce the primary energy demand of buildings to reduce use of resources and greenhouse gas emissions. The target is to reduce the primary energy demand for heating and warm water consumption by 30 % in the building sector.

The ordinance has a holistic approach on the building envelope, the systems engineering and the primary energy sources which are being utilised. Balancing the different measures is possible. For instance the obligations can be fulfilled by either using more insulation or more efficient systems engineering or primary energy sources. The system in general therefore reflects the efficiency benefits of District Heating based on CHP.

For which target groups? National or regional?

The ordinance targets building owners on the national level.

Which activities does it aim to stimulate?

Further reduction of the primary energy demand of buildings.

What results does it expect?

A reduction of the primary energy demand of buildings by 30 %.

Is it related to Germany’s implementation of any EC Directive?

The Act serves as the implementation of Directive 2002/91/EC on the energy performance of buildings, Council Directive 92/42/EEC of 21 May 1992 on efficiency requirements for new hot-water boilers fired with liquid or gaseous fuels, amended by Directive 2005/32/EC of the European Parliament and of the Council of 6July 2005 establishing a framework for the setting of ecodesign requirements for energy-using products and amending Council Directive 92/42/EEC and Directives 96/57/EC and 2000/55/EC of the European Parliament and of the Council

Eligibility Criteria

There are no certain eligibility criteria for District Heating, since the ordinance is targeted at building owners. If buildings are connected to a District Heating grid the calculation method for the yearly primary energy demand takes into account the respective attributes of the system the building is connected to.

Since it is possible to achieve a low yearly primary energy demand on both the demand (insulation etc.) and supply side a low primary energy factor is beneficial for building owners since the primary energy factor is part of the calculation of the yearly primary energy demand. A low primary energy factor on the supply side will therefore drive down the yearly primary energy demand of the building. In order to achieve a low primary energy factor in District Heating the supply has to be based on CHP and/or renewable energy sources.

Impact of Measure

Planning:

Since the EnEV is changed on a regular basis and it also has an effect on heat demand it has a negative effect on the planning stages since it is harder to estimate heat demands and plan production units accordingly.

Generation:

The EnEV effects heat demand in a negative way, but heating supply with a low primary energy factor, especially district heating based on combined heat and power also benefits from the act, making such a heat supply more attractive for consumers.

Distribution:

Demand:

The EnEV has a negative effect on the demand side. The heat demand of buildings is decreasing over the time.

Organization:

Effectiveness of the measure

Could the measure be considered effective?

The measure is effective in the sense that it is driving down heat demand in new and renovated buildings.

Due to which reasons? (quantifications if possible)

The yearly primary energy demand criteria are tightened more and more, therefore driving down the heat demand.

How well does the measure suit the market conditions of your country?

The fact that both the demand and the supply side are incorporated into the calculation of building efficiency is in general the right direction to suit the market conditions in Germany. There is also a market mechanism integrated since customers are free to choose, within the criteria set by the regulation, how to achieve the yearly primary energy demand. But the problems in building stock resulting from lack of energy efficient heating supply are not tackled by the ordinance. Cost efficiency is also not taken into account, which is a driving factor since the ratio of new buildings is comparatively low in Germany.

Are there any recommended changes to this measure?

Is there any review process for this measure and if so what is it?

In 2012 another review is planned, which aims to reduce the primary energy demand by another 30 %.

III. SUPPORT MEASURES FOR DHC

Country

Germany

#

Name and reference of measure

Type of measure

Responsible organ

Existing or planned?

6

Future Investment Programme I and II (ZIP I and II)

Incentive Scheme

Existing

Quotations from the measure

ZIP I and II are incentive schemes which have been concluded a very long time ago. Therefore the actual texts, which lay the foundation to the scheme, are not well documented. The outcomes of the scheme have been well documented though and therefore it was chosen to be part of the 10 measures for this project, since the outcomes of the other measures can not be evaluated as thoroughly as this scheme and because the effects were significant and are still visible in the present time.

The state aid for district heating within the scope of ZIP I and II amounted to approximately DM 1.6 B.

In the ZIP I and II support amounted to a maximum of 35% of the investment costs.

The Purpose of the measure

Why was it introduced?

The ZIP I and II were introduced to fight the negative effects the oil price crises from 1973 and 1978 had on the economy. On the occasion of the Jom Kippur war, respectively the Shah being overthrown in Iran oil prices reached record-breaking heights in a short amount of time, revealing the dependency of Germany on oil imports. In order to become more independent from oil imports there was a focus nuclear power, on domestic resources like hard coal and lignite and on natural gas regarding energy policy. AGFW was commissioned to conduct an all-encompassing study on district heating by the government, showing the potential of district heating in Germany. Based on this study the development of district heating was accelerated by ZIP I and II.

For which target groups? National or regional?

National.

Which activities does it aim to stimulate?

Investments in heat supply and distribution in urban areas in order to reduce energy consumption, contribute to environmental protection, security of supply and fuel diversification. Especially the ZIP II had a strong focus on domestic resources like hard coal and lignite as a substitution for heating oil.

What results does it expect?

Positive effects on the economy while at the same time encouraging sustainable and environmental friendly development through the efficient use of resources.

Is it related to Germany’s implementation of any EC Directive?

No.

Eligibility Criteria

During the time of the ZIP I after the first oil price crisis, swift reaction was a necessity to combat the negative effects on economy. After AGFW had been commissioned to conduct the aforementioned study on the potential of district heating in Germany, only those utilities were supported, which could deliver the targets in regards to potential and heat supply concept in a timely fashion.

As has been mentioned above, the focus of the ZIP II were domestic resources and the corresponding generation and distribution facilities.

Impact of Measure

Planning: